The pound stayed in tight ranges yesterday as it continued to look strong against an ever decreasing dollar but remained weak against the buoyant euro. Yesterday’s BoE inflation report weighed heavily on the pound as expectations of inflation, a crucial issue for the rate-setting Monetary Policy Committee, continued to reach new records last month. The MPC fears that recent steep increases in food and fuel prices will lead individuals and companies to expect higher inflation which will stoke up wage demands and encourage companies to raise prices, making this strengthening in inflationary pressure a self-fulfilling prophecy.
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